Another bank exploded in the US stock market!
The financial report released by New York Community Bank Limited (NYCB) recently showed an unexpected loss of $252 million in the fourth quarter of last year, while analysts had previously expected a profit of $206 million; A loss of $0.36 per share, with earnings per share (EPS) turning from profit to loss year-on-year. At the same time, NYCB announced a 5 cent dividend cut, far from the analyst's previous forecast of being able to maintain at 17 cents.
Affected by negative news, on January 31 local time, New York Community Bank opened 42.6% lower with a short break. At the beginning of the trading session, it fell more than 46% and closed down 37.67%, marking the largest intraday and closing decline since its listing in November 1993, far exceeding the bank's largest decline during the 2008 global financial crisis.
In 2023, during the Silicon Valley banking explosion, Signature Bank also declared bankruptcy, which was taken over by the New York Community Bank.
Therefore, the unexpected losses and sharp decline of community banks in New York have attracted attention and concern from the entire financial market. On that day, regional banking stocks collectively plummeted, with the KBW Regional Banking Index dropping nearly 4% at one point, the largest single day decline since concerns over First Republic Bank in May 2023.
Moody's has included all long-term and short-term ratings and evaluations of New York Community Bank and its subsidiary Flagstar Bank on a potential downgrade watch list, and may downgrade it to a "junk rating.".
Moody's stated that this rating action reflects the unexpected losses, weak profits, substantial decline in capitalization, and increasing reliance on wholesale financing of New York Community Bank in the New York office and multi family residential market.
In the past four years since the outbreak of the epidemic, the commercial real estate market in the United States has been sluggish. The wave of remote work caused by the epidemic and the rapid increase in interest rates have intensified the vacancy rate of office buildings, causing a sharp decline in real estate value and an increase in refinancing costs for borrowers with tight funds. Billionaire investor Barry Sternlicht warned this week that losses in the office market could exceed $1 trillion.
For banks, this means that some landlords may be unable to repay their loans or simply give up their buildings, and default events may increase.
Harold Bordewin, the head of Keen Sumit Capital Partners LLC, which specializes in renegotiating distressed properties, pointed out that this is a big issue that the market must face. The bank's balance sheet did not take into account the fact that many real estate loans cannot be repaid at maturity.
A report released by JPMorgan Chase in April 2023 showed that commercial real estate loans accounted for 28.7% of small bank assets, compared to only 6.5% of large bank assets. This means that small banks face greater risk exposure.